Frontier Group (ULCC) Barclays 43rd Annual Industrial Select Conference summary

Market environment and revenue trends

• Airline demand environment has improved, with constructive supply-demand dynamics and disciplined pricing strategies implemented since mid-October, including a basic fare plus bundle approach and NDC integration with online travel agents.

• Q1 saw a 10% year-over-year improvement in stage length adjusted RASM, with positive trends continuing into March, the quarter's largest revenue month.

• Capacity was slightly down in January and February but is expected to grow 8% in March, driving the strongest year-over-year revenue gains.

• About half of the 10%+ RASM growth is attributed to favorable supply-demand dynamics, with the other half from internal initiatives like pricing and merchandising.

• Load factors are recovering without sacrificing fares, and improved conversion rates are seen across both direct and OTA channels.

Strategic initiatives and operational changes

• Fleet right-sizing is underway, with 24 aircraft exiting via an AerCap deal closing by early June, reducing ownership costs and aligning fleet size with activity.

• Growth profile adjusted to 8%-10% annually, with asset utilization targeted to rise from under 9 hours to 11.5 hours over 18-24 months, lowering unit costs.

• $100 million in rent reduction expected, plus another $100 million in efficiencies from higher productivity and network optimization.

• Deferred 69 Airbus aircraft deliveries from 2027-2029 to 2031-2033, aligning with slower growth and reducing PDP and debt balances by $170-$210 million through 2026.

• No significant cash penalties from the AerCap transaction in 2024-2025; maintenance cost avoidance and rent savings offset loss of sale-leaseback gains.

Network and market positioning

• Network schedule for Q2 was delayed to finalize fleet right-sizing, with some capacity reductions expected in Q2.

• Expansion in Atlanta and the western US is capitalizing on capacity reductions by competitors, especially Spirit and Southwest, leading to strong performance in these markets.

• Overlap with Spirit has dropped from 40%-50% to much lower levels, seen as structurally favorable.

• Growth is focused on infilling existing network utilization and targeting markets with industry capacity reductions.